World Bulletin / News Desk

Turkey’s Economy Minister Nihat Zeybekci has criticized the decision by credit agency Moody's to change Turkey’s rating outlook from “stable” to “negative”.

Moody’s affirmed Turkey’s Baa3 rating, the lowest investment grade.

Zeybekci said Moody's assessment was not based on well-established facts.

"We are in a clearer and more predictable political environment after the local elections in Turkey," he said.

He added that there was "bitterness" about the fact that confidence in the Turkish economy has endured even after the political turmoil that began with the anti-corruption probe December last year. The probe had targeted several of Prime Minister Recep Tayyip Erdogan’s allies.

Zeybekci said Turkey's exports reached US$13.2 billion in February, an all-time-high for the month.

Moody's changed its outlook on Turkey's Baa3 government bond rating to negative from stable Friday, citing increased pressure on the country's external financing position and weaker growth prospects. However, the agency also reaffirmed Turkey's current sovereign Baa3 rating saying this reflects the country's strong fiscal metrics including a declining share of foreign debt and a lengthening of the debt's maturity structure while the country's economic strengths such as its size, wealth and diversification underpinned the rating.

Turkish markets unaffected by Moody's rate cut

Moody's Investor Services decision to cut its outlook on Turkey’s government bond rating, following the Standard & Poor’s downgrade, was widely expected according to Ahmet Mergen, senior strategist at Destek Securities, "you can see that there has not been any significant moves in currencies and the stock market other than ordinary fluctuations."

"This move signifies only that the agency is observing Turkey carefully, but there is no strong possibility of a credit cut in near term," he added.

At the close of the Turkish markets the U.S. dollar had retained an increase of 0.68 against the Turkish Lira down from an increase of 1.2 percent earlier in the day after Moody's announced its outlook change.

Vahdettin Ertaş chairman of the Capital Markets Board of Turkey, the regulatory and supervisory authority in charge of the securities markets in Turkey, predicted that the markets would recover in a short time, saying "There are serious capital inflows to both government debt securities and the stock exchange market recently. I cannot think of a better response."

However, although the agency's decision was met with moderate reactions by economic experts it met with disdain from government officials who said that the agency had a tendency to not see the bright side of developments in Turkey.

According to Development Minister Cevdet Yilmaz the “global economic crisis wouldn’t have happened if international credit rating agencies had made reliable judgments. We have seen the aftermath of the countries that they gave very high rates to.”

Moody’s Chief Analyst for Turkey, Banerji told Anadolu Agency that "We are expecting a slowdown in capital flow in 2014 and 2015 for Turkey. We are concerned about the medium-term growth outlook. Structural reforms maybe delayed due to uncertainty around policies in the next 18 months."

Banerji added that "We scored Turkey very high concerning its economic strength, size and growth potential. It’s a middle-income country with an average income of over US$15,000 per person, which is much higher than other countries in the same rating category and the government’s balance sheet remains strong. We expect inflation to remain very high due to the exchange rate and we expect Turkey's GDP to slow down to 2,5 percent this year, but to rise 0.5 percent to 3 percent next year. A mitigant to Turkey’s GDP growth slowdown is Europe’s recovery."

Moody's changed its outlook on Turkey's Baa3 government bond rating to negative from stable Friday, citing increased pressure on the country's external financing position and weaker growth prospects. However, the agency also reaffirmed Turkey's current sovereign Baa3 rating saying this reflects the country's strong fiscal metrics including a declining share of foreign debt and a lengthening of the debt's maturity structure while the country's economic strengths such as its size, wealth and diversification underpinned the rating.